BUSINESS BRIEFING GREEN WORKSPACE SOLUTIONS MORE THAN A BUZZWORD? CONTENTS GREEN BUILDING OVERVIEW IN SINGAPORE

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1 BUSINESS BRIEFING GREEN WORKSPACE SOLUTIONS MORE THAN A BUZZWORD? SEPTEMBER 2011 A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION CONTENTS 1. Green Building Overview in Singapore 2. Green Commercial Buildings in Singapore 3. Green High Value Added Business Parks 4. Green Leasing 5. Case studies 6. Conclusion 7. C&W s Sustainability Platform A growing number of commercial property developers and socially responsible corporate tenants are turning to Green building technologies and sustainability initiatives to save energy and to cut down on environmental pollutants. Singapore is no exception. According to the Economic Intelligence Unit s (EIU) Asian Green City Index, Singapore is the only city which is ranked Well Above Average. Hong Kong, Tokyo and Seoul are ranked Above Average whilst most Chinese cities are ranked Average, and Indian cities are ranked Below Average. In the context of Asia, Singapore is viewed as a pioneer in terms of environmental consciousness by incorporating green planning in mega-building structures. GREEN BUILDING OVERVIEW IN SINGAPORE Currently, about 470 buildings in Singapore are Green Mark certified. Whilst buildings in Singapore had the ability to be certified Green from as early as January 2005, it was not till 2008 that the Building Construction Authority of Singapore (BCA) stipulated that all new buildings in excess of 2,000 sq m of gross floor area as well as major retrofitted buildings had to be Green Mark certified. This essentially means that it is mandatory for almost all new buildings have to be Green Mark certified. As this assessment is local, it is widely favoured by developers and landlords because not only is it logistically easier to reach out to the authorities to showcase the property s green capabilities but it is also viewed as an initiative that is endorsed by the government with clear and transparent guidelines. The Green Mark rating system in Singapore is similar to other rating systems such as the Green Building Index in Malaysia, Green Star in Australia and China Star in China. 1

2 The BCA also recognizes international green certification such as LEED (Leadership in Energy and Environmental Design), which was developed in the US in 2000 and is awarded to building owners by submitting online applications. Currently, about 50 buildings in Singapore are LEED certified. The Green Mark and LEED certifications are not limited to the structural properties of buildings but also include its interior premises. This affords the companies an opportunity to boost their Corporate and Social Responsibility (CSR) status by occupying a Green certified building and having premises which are also certified green. More than half a decade down the road, the challenge in Singapore is perhaps not about being Green Mark certified; instead it is about the type of Green Mark certification. The table below lists the various types of green mark certifications and their requirements. LEED AND GREEN MARK BUILDING CERTIFICATION LEED certification Green Mark certification LEED Rating Points Required GM Rating Points Required Certified (minimum) 40 to 49 Certified 50 to 74.9 Silver 50 to 59 Gold 75 to 84.9 Gold 60 to 79 Gold Plus 85 to 94.9 Platinum 80 and above Platinum 95 and above Maximum Achievable 100 (base) Maximum Achievable 100 Additional 6 (ID), 4 (RP) Source: BCA, LEED, earth-in-mind Table 1 2

3 GREEN COMMERCIAL BUILDINGS IN SINGAPORE Green buildings are no longer the exception but increasingly becoming the norm especially in the case of Grade A properties in the CBD. Currently, there are 35 office buildings in Singapore s Grade A office market that are certified Green Mark by BCA, and of that 28 buildings have the Green Mark Gold status. New office buildings, such as Asia Square and Ocean Financial Centre are certified Platinum. Six Battery Road was recertified Green Mark Platinum, from its original Green Mark Gold status. 3

4 The table below highlights the level of certification attained by key buildings in the CBD. GREEN MARK PLATINUM = Asia Square Tower 1 = Asia Square Tower 2 = Mapletree Anson = Ocean Financial Centre = Six Battery Road (Recertification) = Twenty Anson GREEN MARK GOLD PLUS = 137 Market Street = Marina Bay Financial Centre (Phase 2) = NUHS Tower Block = Tokio Marine Centre GREEN MARK GOLD = 50 Collyer Quay = 71 Robinson Road = Capital Tower = City House = Environment Building = Fuji Xerox Towers = Marina Bay Financial Centre (Phase 1) = Merrill Lynch Harbour Front = One George Street (Recertification) = Raffles Quay = Plaza By The Park = Republic Plaza = Straits Trading Building = The Treasury = The URA Centre GREEN MARK CERTIFIED = 36 & 38 Armenian Street = Central Mall Office Tower = HSBC Building = KOM Tower = Palais Renaissance = Raffles City Singapore = Robinson Point = Starhub Centre Source: Cushman & Wakefield Research GREEN HIGH VALUE ADDED BUSINESS PARKS / HIGH TECH INDUSTRIAL BUILDINGS: High value added commercial space, comprising business parks and high tech industrial buildings, have been the leaders of technology and building specifications in commercial properties. Currently, 20 such buildings have been Green Mark certified, with new buildings such as Solaris and selected buildings in Changi Business Park certified Platinum. 4

5 GREEN MARK PLATINUM = Citi, 3 Changi Business Park Crescent = Mapletree Business City = Solaris = Standard Chartered Changi Business Park = The Galen = Xilinx Asia Pacific HQ GREEN MARK GOLD PLUS = Caterpillar Reman Facility = IBP = UE BizHub East Business Park, Offices & Retail Development GREEN MARK GOLD = 1A International Business Park = Applied Materials Building South East Asia Pte Ltd = Biopolis Phase One-North DBS Asia Hub = Lonza Biologics Tuas Singapore Expansion 2 = Neuros, Biopolis Phase 2 in One-North = Plaza CBP = UE BizHub EAST Hotel Suites, Serviced Offices & Convention Centre GREEN MARK CERTIFIED = 61 Galen Source: Cushman & Wakefield Research 5

6 What It Means For The Stakeholders Although the Green Mark concept is still fairly new in Singapore, its relevance can be evaluated based on its impact on landlords and tenants. BENEFITS OF GREEN MARK BUILDING CERTIFICATION Green Office Buildings & High Value Added Commercial Space Recognition Costs Profile Landlords Leaders in Environmental and Sustainability Development. Pressure to conform especially if smaller developments can be green mark certified. Higher initial costs for new buildings but energy savings may be cost effective in the long run. Long run energy savings ease cash flow of owners with long term investment horizon. Attract major companies, who often lease substantial space, e.g. in excess of 80,000 sf, on longer term. Optimize property value, specifically for buildings that don t have the advantage of being located in a prime area. Preference for Green business park buildings over conventional offices without green features. Tenants Financial institutions, insurance and legal houses find green leasing as pertinent to illustrate CSR. Pressure for major commercial institutions to attain Green Mark certification as they are positioned as leaders in commercial sector. Green leases may be costlier for occupiers but long term energy savings of up to 30% per month. Longer term cost savings for Small, Medium sized enterprise (SMEs) who want to jump on the Green bandwagon. Raise employee productivity through a better designed working environment with energy savings features, lighting, ventilation and thermal comfort. Enhances business and professional image. Attracts talents and professionals, contributing to corporate growth through human capital. Long Term Benefits Source: BCA, LEED, earth-in-mind Lower maintenance costs Reduced risk of physical obsolescence. Command higher rentals or sustained rentals. Attract property investors. Superior business and social image. Table 2 6

7 The benefits for commercial and business parks/ industrial buildings can be seen in the form of long term energy cost savings notwithstanding higher initial material and installation costs. However, intrinsic value will be derived from how owners leverage Green Mark certification in their marketing strategies and position themselves as leaders in sustainable development. Such building owners can emerge as space providers who look beyond instant profitability. Although less commonly discussed, there is a demand for business parks and industrial spaces to be Green Mark certified as well. Currently, there are limited occupiers which voluntarily opt for Green Mark certification but there is potential for an increasing number of occupiers to consider this, as such space becomes increasingly popular for major financial institutions which relocate their back-office support functions to business parks and hi-tech business buildings. Typically, landlords can expect payback periods of 2 to 8 years, depending on the comprehensiveness of the Green building features. Building owners with an investment horizon of 10 years and above can expect to feel safe about their investments into Green Mark building certification. As most investors adopt a longer term investment, the payback on the investment on the green features will be realistic. The construction costs of Green building have been on the decline as the concept becomes more popular. In addition to economies of scale, the payback period can potentially be lower as electrical tariffs increase. The cost savings from the Green building features may be more visible and the actual benefits for landlords and occupiers may be higher. The Building and Construction Authority (BCA) officially launched the BCA Green Mark Scheme in 2005 that aims to promote environmental awareness in the construction and real estate sectors. It ranks the environmental friendliness of a building whilst encouraging the adoption of an integrated design approach. Most recently, BCA together with the Singapore Government has announced a new financing loan scheme to fund up to $5 million upfront costs of energy retrofits done by building owners and energy service companies a bold initiative to urge buildings to use more efficient cooling systems. Green goal: 80% of Singapore buildings green by

8 INITIAL INVESTMENTS AND PAYBACK PERIOD FOR GREEN MARK BUILDING CERTIFICATION GM Award (for Buildings) Average Green Premium Average Payback Platinum 2-8% 2-8 yrs Gold Plus 1-3% 2-8 yrs Gold 1-2% 2-6 yrs Certified 0.3-1% 2-6 yrs Source: BCA estimates Table 3 Occupiers who opt for Green buildings may attract superior talent as people are increasingly favouring an environmentally friendly office, which is of ultimate importance for corporate long term growth strategy. With a holistic set of benefits and increasing attractiveness of such space, Green Mark certification is expected to sustain interest from both developers and occupiers. GREEN LEASING Currently, there have been limited leases specifically drawn up for green features as green leasing is still an emerging trend in Singapore. Grade A office properties in Singapore saw a significant 25% rental increase from 2010 to H1 2011, with new office buildings taking the lead. State of the art building design, futuristic facades and high tech building automated systems are undoubtedly the draws of a new office building. Nevertheless, a comparison of leases in new office buildings versus older office buildings may provide some light about the rental premium in new buildings, most of which are well specified with Green building features has been a year of significant turnaround for the Grade A office market in Raffles Place, Singapore s prime CBD location. Vacancy of Grade A office space in this area declined steadily till Q but going into Q2 2011, vacancy of Grade A office space of older office buildings, built before 2007, had increased. The increase in vacancy is due to the spate of relocations, as financial institutions which pre-committed in 2010 are due for relocations to newer office buildings such as Asia Square and Ocean Financial Centre. While this is not conclusive of the preference for Green Mark certified buildings, it is essential to note that these new office buildings are of high building specifications and Green Mark certified. The Green Mark certification plays an active role in the energy efficiency, day lighting, ventilation, and workspace comfort for users in such buildings. 8

9 VACANCY GAP OF NEW AND OLDER GRADE A OFFICE IN RAFFLES PLACE Vacancy of Grade A office in Raffles Place (%) % 2.50% 1.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Vacancy of Grade A office (built after 2007) in Raffles Place Vacancy of Grade A office (built before 2007) in Raffles Place Source: Cushman & Wakefield Research Figure 1 The distinction between new and existing office buildings can be seen in increased occupancy cost differentials. As at end H1 2011, the difference in gross rents had widened to $3.25 psf per month, largely due to location as most new office buildings are in Marina Bay and are considered the most prime in the CBD. All of these buildings are Green Mark certified. Given that Green Mark certification played a major role in the building specifications and positioning of new office buildings, we are confident that part of the rental premium for Green building features is evident. Whilst there are currently no leases specifically designed for buildings with Green features and no sign of the Singapore Government giving incentives for Green leases signed, it would be interesting to see if future leases in Green buildings will be bundled with Government incentives such as tax rebates, as in the case of Australia. 9

10 RENTAL DIFFERENTIAL OF NEW AND OLDER OFFICE BUILDINGS IN RAFFLES PLACE Gross Rents of Grade A office in Raffles Place (S$ psf per month) Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Raffles Place Grade A Office (only buildings completed from 2007) Raffles Place Grade A Office (exclude buildings completed from 2007) Source: Cushman & Wakefield Research Figure 2 Eco Office Interior In view of the tight office supply, not all available space can be in buildings which have been Green Mark certified. Companies which find their dream office space in non Green Mark certified buildings can still play their part for the environment by getting their office space Green Mark certified. 10

11 CASE STUDIES ASIA SQUARE Asia Square, completed in H1 2011, featured the most state-of-the-art green building features. This was achieved through an integrated design incorporating the following: Facade Biodiesel Plant Motion Sensors Water Conservation Photovoltaic Cells Natural daylight maximization Regenerative Lifts With the above integrated systems, Asia Square was awarded Singapore s Green Mark Platinum and the US Green Building Council s (USGBC) Leadership in Energy and Environmental Design Core & Shell (LEED-CS) Gold pre-certification standards. SOLARIS Ecoskyscrapers in Singapore remained an audacious ambition until we saw Solaris a 15-storey sustainable architecture. Designed by Dr. Ken Yeang, internationally renowned Malaysian architect and regarded as the father of sustainable bioclimatic buildings - the site of Solaris is part of a Zaha Hadid-masterplanned office park in central Singapore called Fusionopolis 2B. The facade is covered with sun-shading louvers to mitigate the tropical heat of the region, and the entire structure is interpolated by a continuous band of vegetation, running in a spiral from the basement to the roof. 11

12 To achieve office interior Green Mark certification, companies can adopt the following strategies in the design of their office space: GREEN OFFICE DESIGN STRATEGIES Energy Efficient System Lighting Air-conditioning Energy Management Sustainable Construction Source: Cushman & Wakefield, earth-in-mind Design Zoning and Control for business units with different operational hours Maximise day-lighting, use of photo sensors Tasks Lighting Higher Efficiency fluorescent lighting Zoning to satisfy the different requirements of various workers and systems Passive Displacement Ventilation Systems CO2 sensors to maintain indoor environmental quality Use of Energy Start qualified equipment Power management for office equipment (sleep mode) Use of products with Green Label Singapore Use of Lightweight demountable dry construction, such as partition boards Table 4 In Green office buildings, the principle of eco office design is mostly all about energy savings. In the context of Asia, greater emphasis can be placed on thermal comfort, particularly the adequacy of airconditioning. Currently, many of the older office buildings in Singapore offer only air conditioning which inevitably leads to excessive energy consumption. The material test is occupational comfort, which requires striking a balance between cooling air temperature and minimal energy wastage. This can be achieved through a combination of temperature calibration, air-conditioning zoning, and integration with automated blind systems that may lower the overall costs involved in the longer run. From a practical perspective, eco office interiors are an efficient way for corporate organizations to contribute to environmental sustainability. In the event that companies are unable to secure space in a Green Mark certified office building, having eco office fit outs will still allow occupiers of non Green Mark certified office buildings to play a part in addressing environmental concerns. In addition, savings derived from cheaper rents can be directly passed on to the premium for eco-friendly fit outs. 12

13 CONCLUSION Though a relatively new concept, Green Buildings is by no means marketing jargon. It is a concept that is quickly being integrated into every sphere of our lives - redefining the space we occupy and fundamentally changing the way we live. In Singapore, the Government has played a crucial role in attaining the level that the city-state has achieved so quickly that of being the greenest city in Asia and the only Asian city that is ranked Well Above Average in the EIU s Asian Green City Index. Driven by the Government, the Green Mark certification is compulsory for all new commercial buildings in excess of 2,000 sqm. The validation process is rigorous, for there are physical inspections, which is a contrast to LEEDs accreditation, which can be applied for and assessed online. The Singapore Inter-Ministerial Committee on Sustainable Development (IMCSD) has set the goal of achieving the BCA Green Mark Certified rating for 80% of all Singapore office buildings by To that end, the BCA rolled out its 2nd Green Building Master plan, a roadmap that sets out specific initiatives to achieve a truly sustainable built environment in Singapore by By then, building owners that do not conform may find themselves the anomaly. The pressure to provide green building features is set to increase. It is a movement that has gathered momentum and is increasingly becoming one of the key factors when decisions regarding office space are made. This is despite the high initial costs and benefits such as energy savings and potential lower maintenance costs being realised only in the long term. Due to this, occupiers who adopt green leasing are larger corporate entities on long leases. Whilst retrofitting for Green features can be costlier or require more effort than developing green features for new buildings, building owners are expected to be more open to such options for longer term cost savings and intrinsic benefits. As many of the office skyscrapers in the CBD today are fairly well positioned buildings, many owners are optimistic about their on-going investment potential and this encourages many to retrofit to keep up with the times. Green building features will play a critical role in boosting the attractiveness and competitiveness of existing office buildings, in comparison to new office buildings. Several key commercial buildings have been re-certified, including some which were eventually awarded a higher Green Mark building status - a clear sign of the increasing interest for sustainable development. 13

14 C&W S SUSTAINABILITY PLATFORM Cushman & Wakefield s Sustainability Platform is built on the foundation of our Corporate Commitment to sustainability. We embrace the responsibility and opportunity embodied in addressing the environmental, economic, and social aspects of sustainability. We pursue financially-sound strategies that enhance workplace conditions, build employee skills, and address the significant natural resource impacts of the built environment. C&W is engaged in efforts to address the impact of our own operations and is dedicated to helping our clients integrate best practices into their operations and supporting their own corporate sustainabilitiy commitments. The C&W Sustainabilty Strategies team has deep experience in the field, with superior knowledge of best practices, opportunities, and pathways to overcome common challenges. The strategies we pursue for our own operations and for our clients are based on three principles. First, C&W recognizes the importance of supporting a global approach that guides and supports our experts around the world in the regional actions and use of local knowledge. Second, our people are central to the success of our sustainability strategies. We encourage the growth of knowledgable experts across C&W through education and training, and support of specialty practice groups focused on key topics. Through partnerships with other organizations, we create unique opportunities to create industry-leading products and strategies, and share cutting edge ideas by staying apprised of the latest tools, tactics and trends in sustainability. C&W CORPORATE COMMITMENTS C&W s sustainability policy and objectives are supported by action plans and a program of continual improvement. We employ a wide range of strategies aimed at reducing our consumption, carbon emissions, and generally improving our sustainability performance as a business. In 2008, C&W s signed a Memorandum of Understanding (MOU) with the US EPA, in which we committed to reduce our carbon dioxide emissions by 10% by The MOU sets out environmental best practices designed to enhance energy efficiency and reduce the carbon footprint, promote water conservation, and minimize waste within C&W s corporate offices and properties under management. We are the first real estate services firm to enter into such as understanding. In the UK, we recently adopted BREEAM In-Use as management platform for the spaces that we occupy and use this to drive performance across our business. 14

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